Correlation Between YAOKO CO and RENTOKIL INITIAL

Can any of the company-specific risk be diversified away by investing in both YAOKO CO and RENTOKIL INITIAL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining YAOKO CO and RENTOKIL INITIAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between YAOKO LTD and RENTOKIL INITIAL ADR5, you can compare the effects of market volatilities on YAOKO CO and RENTOKIL INITIAL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in YAOKO CO with a short position of RENTOKIL INITIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of YAOKO CO and RENTOKIL INITIAL.

Diversification Opportunities for YAOKO CO and RENTOKIL INITIAL

-0.28

Correlation Coefficient

YAOKO CO  RENTOKIL INITIAL

Very good diversification

The 3 months correlation between YAOKO and RENTOKIL is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding YAOKO LTD and RENTOKIL INITIAL ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RENTOKIL INITIAL ADR5 and YAOKO CO is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on YAOKO LTD are associated (or correlated) with RENTOKIL INITIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RENTOKIL INITIAL ADR5 has no effect on the direction of YAOKO CO i.e., YAOKO CO and RENTOKIL INITIAL go up and down completely randomly.

Pair Corralation between YAOKO CO and RENTOKIL INITIAL

Assuming the 90 days horizon YAOKO LTD is expected to generate 0.45 times more return on investment than RENTOKIL INITIAL. However, YAOKO LTD is 2.21 times less risky than RENTOKIL INITIAL. It trades about 0.04 of its potential returns per unit of risk. RENTOKIL INITIAL ADR5 is currently generating about -0.01 per unit of risk. If you would invest  4,940  in YAOKO LTD on October 4, 2024 and sell it today you would earn a total of  810.00  from holding YAOKO LTD or generate 16.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

YAOKO LTD  vs.  RENTOKIL INITIAL ADR5

YAOKO LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YAOKO LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, YAOKO CO is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

RENTOKIL INITIAL ADR5

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RENTOKIL INITIAL ADR5 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, RENTOKIL INITIAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with YAOKO CO and RENTOKIL INITIAL

The main advantage of trading using opposite YAOKO CO and RENTOKIL INITIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YAOKO CO position performs unexpectedly, RENTOKIL INITIAL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in RENTOKIL INITIAL will offset losses from the drop in RENTOKIL INITIAL's long position.

The idea behind YAOKO LTD and RENTOKIL INITIAL ADR5 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.